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My friend Roger Ehrenberg has posted one of the most honest candid post mortems on a failed startup that I have ever seen from the leadership of the company. His company, Monitor 110, tried to use technology to surface investable information from the Internet. That is an incredibly difficult problem to solve and I have witnessed more than a few firms stub their toe on it. But it’s the back story that Roger tells that is the most potent. Every entrepreneur and VC needs to read his post.
Much hype, no killer app.(I’m in their core client base. I told my TMT analyst maybe we should check out Monitor110. After 5 minutes on their website, couldn’t figure WTF it would do for us.Roger post shows part of the problem…you need laser focus on the one thing that matters.Sometimes when you can talk a lot about problems that gets confused with solving them, and when it comes to the product, there’s no ‘there’ there. )
Long but fascinating. I applaud anyone willing to reflect upon a “failure” whether personal or professional, especially publicly. It shows a strength of character.
Very few people come out and admit there mistakes, and how they can do better like this. Kudos!
Thanks for the link. Unfortunate news but illuminating post. I can see from a VC perspective why you’d pick factors 1 and 4 (no single leader and too much financing) as the most deadly as those are factors that a VC can influence and they can precede other factors on the list. That said, from an operating perspective I’d actually pick #5 (not being close enough to the customer) as the most deadly. In my experience, clear customer focus and feedback will drive product direction, release schedules, overall business strategies, and resolve internal differences of opinion, both at the corporate and, if applicable, at the board level.
I agree: #5 is the one you can’t overcome. Sometimes even if you’re close to the customer your dead. If you’re not close to the customer you will definitely be dead.
This is so true, It ‘s crazy that too much money can lead to failure. But it is such a good thing to acknowledge that they were too far from customer and the market reality. Is it one of the most common sin of the moment ? Are Vcs going out of touch with Main street ?There is something we should thing about here. To fuel this debate I have written a post You can read here.I stress the point that this year difficulties are an opportunity in disguise, an opportunity to rethink the industry, its objectives and its way of interacting with the society as a whole. We used to be the ‘avant-garde’ now we are so in advance that we fund and create products that are far from the customer base. Perhaps it is time to go back to the basis. Go back to the streets, talk to ordinary people, stop making projects for us by us.http://leetchee.blogspot.co…
Great post Roger. It is indeed very dangerous to have too much money without a product. A product is something people like and that eventually will make you money. Sometime it comes quickly, but sometime it comes from smart trial-and-error, feedback from custumer, luck, or changes in the external conditions. And TIME. Prepare for the long run: control costs and find medium term revenue streams.
I like Mistake #4: Too much money. We weren’t forced early on to be scrappy and revenue focused.I wonder how many startups are listening to investors who say “Don’t focus on revenue, just focus on expanding your userbase” and how many are focusing on revenues from the start?
A company needs one decisive leader, there’s no doubt about that. As for #4 — only the undisciplined overspend because they can. A CEO of a start-up is playing with other peoples money. They need to treat that money with respect. Filled coffers shouldn’t change their hiring plans. Only a fool would increase costs simply because they can.
I’m sure that Roger learned a lot from his experience with Monitor110, but my take after reading his post-mortem is that he’s too convinced he was right about the correct direction for the company to take. Clearly, his perception of how things went is that the company didn’t focus enough on shipping a product and getting feedback from customers and instead focused overly much on perfecting its technology. Hindsight 20/20, who’s to say a different approach would have worked any better?Clearly a business can’t succeed without customers. He’s absolutely right about that. However, if v 1.0 gets you laughed out of every sales call you make, how much better off are you?He’s 100% dead right about lesson one, though. No matter who was right, the company needed a strong leader to pick a course and see it through, whichever way they decided to go.
It’s a tough problem, but Skygrid.com has been doing a pretty good job at addressing this in a scalable and useful way. This is supported by tough to please customers starting to become true advocates. Full disclosure, I’m on their advisory board which also makes me a big fan, but I also kept up w/their approach versus competitors in this space, and I’d have to say that they are more in touch w/the market than others have been. Note, Monitor110 is not the first company that had to somewhat abandon this market.I’m a fan of Roger’s and was impressed w/the thorough post mortem. It’s a tough thing to do, but he wrote a gracious piece. It’s interesting in hindsight to see how our assessment of their situation matched up to the reality. For one thing the early hype they got versus the job postings we were seeing, suggested a disconnect on how far along they really were towards a real solution to the problem they wanted to address. Oh well, while sad it’s still good to see them having had the guts to try to solve this very tough challenge.Oh, that reminds me of the dead giveaway that they were headed for trouble early on, it was when we saw quotes fm the management team suggesting that eventually they would replace the need for Bloomberg & Reuters’ services. It’s good to have big aspirations, but it’s also good to have one’s feet firmly on the ground and dealing w/reality 😉
It reads to me like the normal strategy of big internet companies.1. Put a lot of former great employees in a room.2. Raise way to much money, pay them tons of cash, tell them they are they are genius.3.They make a lot of noise, spend all the money for a couple of years.4. Boom out goes the lights.A great employee is a terrible Entrepreneur.An internet page is about people, I am always baffled at the amounts of money use to make an internet site, what did he have seven million dollars.Too much PR, too early, all the dot.com failures seem to believe they are brick and mortar business, they are not, a great internet business grows virally, the word of mouth approach, not really a PR release and public relations need.There is no pointing at people here, but in the end, it is the people that failed, the wrong people, making the wrong decisions and squandering all the money.
Thanks for the link. I left a comment. It’s always tough to share a failure, but always good to read about them to realize that it’s par for the course. Saw your comment about John Doerr saying you have to lose $30 million before becoming a good investor. I wonder if the same holds true for a good entrepreneur?
I don’t think so
There are few things more instructive than failure, and I think it is a great post. Chances are that if he wrote this list six months from now, there will be some additional points that would be added. That’s the nature of the learning process for entrepreneurs.
Roger is a class act. Awesome angel…he busted our balls to get in mytrade at his own best price…which drove us nuts….and was just as valuable to ALL of us on the exit. I honestly wouldn’t do another deal without sitting down with him first.There is a lot to be learned from Roger’s post but the main thing that is missing is that even the most well-laid plans of mice and men CAN fail. It’s a post that should give all investors and entrepreneurs pause and a deeper respect for RISK, which is ALWAYS there.